U.K. Water Companies ‘in Sweet Spot’ in Current Market, UBS Says

June 29 (Bloomberg) -- U.K. water companies “will remain
in a sweet spot as long as the current lackluster macro-environment persists,” with Pennon Group Plc considered the
most likely takeover candidate, UBS analysts said in a note.

Similar M&A speculation persists as well about Severn Trent
Plc, one of the U.K.’s three publicly traded companies, analysts
including Stephen Hunt said in the note today. Possible upside
is about 18 percent for Pennon and 35 percent for Severn Trent
in the event of M&A, the note said.

The valuation discount at United Utilities Plc, the U.K.’s
largest publicly traded water company, is considered excessive,
with UBS initiating coverage of the company at a ‘buy,’ the
analysts said. Safe returns and consistent outperformance are
likely for U.K. water companies, UBS said.